When an Undecided Attorneys’ Fees Issue Means that Order Deciding Merits Is Not Final for Purposes of Appeal — Finality Implications of Sanctions-Based vs. Contract-Based Fees Award

From DeLauro v. Porto (In re Porto), 2011 U.S. App. LEXIS 13941 (11th Cir. July 8, 2011):

Under Federal Rule of Appellate Procedure 4(a)(1), DeLauro had 30 days to file a notice of appeal from the final order resolving the matter. See Fed. R. App. P. 4(a)(1); see also 28 U.S.C. §§ 158(d)(1) and 1291 (giving the courts of appeals jurisdiction over final orders and decisions of district courts in bankruptcy cases).

The timeliness of that October 15, 2009 notice of appeal in turn depends on whether the district court's May 26, 2009 order affirming the bankruptcy court's judgment that there was no merit in DeLauro's objections was a final, which is to say, appealable order. If it was, DeLauro's notice of appeal came three-and-a-half months too late. If, on the other hand, the district court's May 26, 2009 order on the merits of the objections did not become final until September 15, 2009 when that court entered its order resolving the sanctions issue, then DeLauro's October 15 notice of appeal came in time to bring up both of the district court's orders.

A final order is "'one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" Jove Eng'g, Inc. v. IRS, 92 F.3d 1539, 1547 (11th Cir. 1996) (quoting Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633 (1945)). The question is whether an undecided attorney's fees issue means that the litigation on the merits is not ended for final judgment purposes. The answer is that the Supreme Court has established a bright line rule that the issue of attorney's fees is always collateral to the merits, and a decision on the merits, even if the attorney's fees issue remains unresolved, is immediately appealable under 28 U.S.C. § 1291. Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202-03, 108 S.Ct. 1717, 1722 (1988). Thus, "[w]here an order disposes of a party's substantive claims, but does not dispose of claims relating to attorney's fees, the time for appeal of the substantive claims starts to run from the date of the first order unless the district court grants a delay." Fluor Constructors, Inc. v. Reich, 111 F.3d 94, 96 (11th Cir. 1997). Although we have applied Budinich to appeals under 28 U.S.C. § 1291 and appeals from administrative agency decisions, this is the first time we have had occasion to apply that decision to cases appealed to this Court from a district court exercising appellate review of a bankruptcy court's order under 28 U.S.C. § 158(a). See, e.g., Fluor Constructors, 111 F.3d at 96 (appeal from an administrative agency decision); Golub v. J.W. Gant & Assoc., 863 F.2d 1516, 1518 (11th Cir. 1989) (appeal from a district court judgment). There is no reason not to apply Budinich to appeals from the district court in bankruptcy cases.

In Budinich the plaintiff had filed in the district court motions for a new trial and for attorney's fees. Budinich, 486 U.S. at 197; 108 S.Ct. at 1719. The district court issued an order denying the plaintiff's motion for a new trial and finding that he was entitled to attorney's fees, but the court requested further briefing on the issue of the amount of fees it should award. The district court's final order setting the amount of attorney's fees did not come until several months later. After that order was issued, the plaintiff appealed all of the district court's orders, including the earlier one denying his motion for a new trial. The court of appeals concluded that the appeal from the district court's order denying the plaintiff's motion for a new trial was untimely because that order was a final, appealable one despite the fact that the issue of attorney's fees remained unsettled. Id., 108 S.Ct. at 1719.

The Supreme Court affirmed. Id. at 202-03, 108 S.Ct. at 1722. In doing so, the Court explained that "[c]ourts and litigants are best served by the bright-line rule, which accords with traditional understanding, that a decision on the merits is a 'final decision' for purposes of § 1291 whether or not there remains for adjudication a request for attorney's fees attributable to the case." Id. at 202-03, 108 S.Ct. at 1722. The Supreme Court insisted on a bright-line rule because "[t]he time of appealability, having jurisdictional consequences, should above all be clear." Id. at 202, 108 S.Ct. at 1722. In the interests of clarity, the Court determined that "the § 1291 effect of an unresolved issue of attorney's fees for the litigation at hand should not turn upon the characterization of those fees [as part of the relief on the merits] by the statute or decisional law that authorizes them." Id. at 201; 108 S.Ct. at 1721. It stated that "what is of importance here is not preservation of conceptual consistency in the status of a particular fee authorization as 'merits' or 'nonmerits,' but rather preservation of operational consistency and predictability in the overall application of § 1291." Id. at 202; 108 S.Ct. at 1722. "This requires, we think, a uniform rule that an unresolved issue of attorney's fees for the litigation in question does not prevent judgment on the merits from being final." Id., 108 S.Ct. at 1722.

The circuits that have considered this issue have held that Budinich applies to appeals brought under 28 U.S.C. § 158(d) where, as here, the district court entered a final order on the merits of the underlying dispute but left unresolved the issue of attorney's fees. See In re Pratt, 524 F.3d 580, 585 (5th Cir. 2008) ("[I]rrespective of [the district court's] remand of the issue of attorney's fees, the district court's order affirming the bankruptcy court's denial of sanctions is a final judgment on the merits appealable under § 158(d)."); In re Johnson, 501 F.3d 1163 (10th Cir. 2007) (same); In re Rivera Torres, 432 F.3d 20, 22-23 (1st Cir. 2005) ("The fact that here we are operating under § 158(d) rather than § 1291 makes little difference . . . given the great similarity between an adversary proceeding in bankruptcy and an ordinary civil action." (quotation marks and alteration omitted)); In re Colon, 941 F.2d 242, 245-46 (3d Cir. 1991) (affirming district court's dismissal for lack of jurisdiction because the "order of the bankruptcy court, apart from its allowance of attorneys' fees, was a final appealable decision on the merits within the meaning of 28 U.S.C. § 158(a)"). We agree with our sister circuits that the Budinich rule applies in the bankruptcy context.

We recognize that this Court and others have held that when attorney's fees are awarded pursuant to a contract or are computed as part of the damages award, an order on the merits does not become final and appealable until the attorney's fees issue is resolved. See, e.g., Brandon, Jones, Sandall, Zeide, Kohn, Chalal & Musso, P.A. v. MedPartners, Inc., 312 F.3d 1349, 1355 (11th Cir. 2002) ("In this Circuit, a request for attorneys' fees pursuant to a contractual clause is considered a substantive issue; and an order that leaves a substantive fees issue pending cannot be 'final.'"); In re Atlas, 210 F.3d 1305, 1308 (11th Cir. 2000) ("[A] bankruptcy court's order is not final for purposes of appellate jurisdiction where the bankruptcy court finds liability for violation of the automatic stay, but defers assessment of damages."); In re Fugazy Exp., Inc., 982 F.2d 769, 776 (2d Cir. 1992) ("In sum, for a bankruptcy court order to be final within the meaning of [28 U.S.C.] § 158(a), the order . . . must completely resolve all of the issues pertaining to a discrete claim, including issues as to the proper relief."); In re Morrell, 880 F.2d 855, 856 (5th Cir. 1989) ("The Supreme Court has stated that 'where assessment of damages or awarding of other relief remains to be resolved [judgments] have never been considered to be "final" within the meaning of 28 U.S.C. § 1291.'") (quoting Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737, 744, 96 S.Ct. 1202, 1206 (1976)).

Along those lines, in In re Atlas we held that an order by the bankruptcy court that decides the merits but defers assessment of damages is not a final, appealable order. In re Atlas, 210 F.3d at 1307-08. In that case, the bankruptcy court's order was not final because the order did not "leave for future resolution only the amount of attorney's fees and costs, but also [left] for assessment punitive and actual damages." Id. at 1308. We distinguished that case from Budinich by noting that "this case concerns an award of damages, not just attorney's fees, which has not yet been assessed." Id. That "distinction [was] crucial to our analysis." Id. Likewise, in MedPartners we held that a district court's order ruling on all of the plaintiff's requests for relief and "closing" a case was not a final appealable order because there remained an issue of contracted-for attorney's fees. MedPartners, 312 F.3d at 1355. As we explained, "the district court explicitly retained jurisdiction to award attorneys' fees," and "[i]n this Circuit, a request for attorneys' fees pursuant to a contractual clause is considered a substantive issue[,] and an order that leaves a substantive fees issue pending cannot be 'final.'" Id. (citing Ierna v. Arthur Murray Int'l, Inc., 833 F.2d 1472, 1476 (11th Cir. 1987)).

This case is unlike MedPartners, In re Atlas, and others of that type because here the unresolved issue of attorney's fees was not part of an award of damages pursuant to contract or otherwise. It was, instead, part of a sanctions award issued in addition to and separate from the merits judgment in the case, and it therefore falls on the Budinich side of the bright line of finality. As a result, DeLauro had 30 days from May 26, 2009 to file his notice of appeal from the district court's order affirming the bankruptcy court's merits decision. See Fed. R. App. P. 4(a)(1). Because his October 15, 2009 notice of appeal missed that deadline by more than three months, we lack jurisdiction to review the district court's judgment affirming the bankruptcy court's order denying DeLauro's objections on the merits. See United States v. Ward, 696 F.2d 1315, 1317 (11th Cir. 1983) ("The timely filing of a notice of appeal is a mandatory prerequisite to the exercise of appellate jurisdiction.").

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